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Paying Your Rent: Why Cash is not King

Will that be cash, check or charge? Actually, that should be check. It’s the easiest and best way to document that
your rent has been paid and lenders prefer this form of documentation should you ever apply for a mortgage in the future (12 months of canceled rent checks is the norm, especially if you rent from an individual landlord as opposed to a property management company). Regardless, paying by cash is not a wise thing to do – even if you’re able to get a receipt from the landlord, there’s no better document than a canceled check that’s been processed through the Federal Reserve System. At anytime, receipts may be subject to verification of authenticity. A canceled check, on the other hand, is seldom questioned.

Now, if you don’t have a checking account, the second best thing is to pay by certified funds – such as a money order or cashiers check, depending on the amount of your rent. Money order limits are typically $1,000 per money order and are sold by banks and even the post office for just a few dollars (but still free at Amscot). A cashiers check has no limit imposed on the amount of the check – however, they are often sold for $5 dollars. Some friendlier banking relationships allow that fee may be waived.

The only difference between using certified funds instead of a personal check is the tremendous inconvenience involved to confirm if a money order or cashiers check was cashed. Banks are not the easiest to deal with when it comes to retrieving a document. On the other hand, personal checks that have been canceled are often viewable with the help of the latest online banking systems. If not, then copies are mailed to you along with your monthly checking account statement.

The important point is to have some means of documenting that your payment was made! Unfortunately, unless you do get some sort of receipt either issued by the landlord or postal carrier showing that your check was delivered; the landlord could still claim they never received the payment at all or it was late. This rarely happens – but if it ever does, you should seriously consider sending your future payments using sometime type of delivery confirmation
service… especially if you suspect the landlord of any wrong doing (i.e., purposely delaying the receipt of payments to charge a late fee). Once again, these types of circumstances are very rare and sending it by mail (or even dropping it off) is sufficient without asking for a receipt. Just use the “first time” rule. Once a problem such as this happens for the first time, then switch to a more official delivery method. Just be sure you don’t live by the “first time” rule when using cash – that could prove to be a very expensive mistake, even happening for the first time.